Business Highlights

Jul 24, 2014
The Associated Press

As the U.S. economy has improved and employers have regained confidence, companies have been steadily shedding fewer workers. Which is why applications for unemployment benefits have dwindled to their lowest level since February 2006 — nearly two years before the Great Recession began — the government said Thursday.

The trend means greater job security and suggests a critical turning point in the economic recovery. It raises the hope that workers’ pay will finally accelerate after grinding through a sluggish recovery for the past half-decade.

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Airlines report big 2Q profits on strong demand

Investing in airlines has long been the butt of jokes, especially when many U.S. carriers traipsed through bankruptcy court in the past decade.

Now riding a post-merger tide of higher fares and stable fuel costs, those same airlines are piling up profits — and sharing the newfound riches with investors.

American Airlines announced Thursday that it would pay its first dividend in 34 years, and both American and United Airlines announced big plans to buy back their own stock, a strategy designed to boost the value of remaining shares.

Those announcements came as American, United and Southwest reported record-setting second-quarter results, following Delta’s solid performance a day earlier.

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Wal-Mart names new CEO of US discount division

NEW YORK (AP) — Wal-Mart is replacing the chief of its U.S. discount stores in what could be an indication that it’s losing confidence that its largest business unit will rebound after more than a year of disappointing results.

Greg Foran, who was promoted to president and CEO of Wal-Mart Asia earlier this year, will succeed Bill Simon, who had been CEO of Wal-Mart’s U.S. stores for four years, effective on Aug. 9.

The move, which was announced Thursday, marks the company’s first big management shake-up under Doug McMillon, who took over as CEO of Wal-Mart Stores Inc. in February. Foran, 53, will report directly to McMillon.

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Varying health premium subsidies worry consumers

MIAMI (AP) — Linda Close was grateful to learn she qualified for a sizable subsidy to help pay for her health insurance under the new federal law. But in the process of signing up for a plan, Close said her HealthCare.gov account showed several different subsidy amounts, varying as much as $180 per month.

Government officials say Close — and other consumers who have received different subsidy amounts — probably made some mistake entering personal details such as income, age and even ZIP codes. The Associated Press interviewed insurance agents, health counsellors and attorneys around the country who said they received varying subsidy amounts for the same consumers.

As consumers wait for a resolution, some have decided to go without health insurance because of the uncertainty while others who went ahead with policies purchased through the exchanges worry they are going to owe the government money next tax season.

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HK firms on edge as democracy rally blockade looms

HONG KONG (AP) — As activists vow to shut down Hong Kong’s financial district in protest at China’s attempt to hobble democratic elections in the city, businessman Bernard Chan is preparing for the worst.

Chan’s investment company has added backup phone lines, bought extra laptops and stockpiled instant noodles in case its headquarters downtown is caught in the middle of the protest.

Activists have threatened for more than a year to rally 10,000 protesters to freeze the Asian financial centre’s central business district to press their demands for full democracy. The protest plan has set Hong Kong’s business community on edge. Companies operating in the financial district, where skyscrapers line narrow, winding streets, have scrambled to make sure they’ve got adequate backups in place while trade groups have taken out newspaper ads voicing their objections. Financial analysts have issued reports fretting about possible disruption.

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GM profit 2Q falls 85 pct. on recall costs

Recall expenses chopped $1.5 billion from General Motors’ bottom line in the second quarter, as it added up the costs of repairs for nearly 30 million cars and set aside funds to compensate victims of small-car crashes.

The nation’s biggest automaker posted a net profit of $190 million, or 11 cents per share. A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations, according to data provider FactSet.

So far this year GM has recalled almost 30 million vehicles, surpassing the company’s annual record of 11.8 million in 2004.

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IMF cuts US and global growth forecasts for 2014

WASHINGTON (AP) — The International Monetary Fund foresees the global economy expanding less than it had previously forecast, slowed by weaker growth in the United States, Russia and developing economies.

The lending organization predicted Thursday that global growth will be 3.4 per cent in 2014, below its April forecast of 3.7 per cent. But the fund still expects the growth of the world’s economy to accelerate a bit to 4 per cent in 2015.

The downgrade of this year’s estimate for the global economy reflects much slower growth in the United States. The IMF now expects just 1.7 per cent U.S. growth in 2014, which would be the weakest since the recession officially ended five years ago. That’s down from its April prediction of 2.8 per cent, mostly because of a sharp weather-related contraction in the first quarter. The U.S. economy shrank at an annual rate of 2.9 per cent in the first three months of the year.

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US new-home sales plummet in June

WASHINGTON (AP) — Sales of new U.S. homes plunged in June, a sign that real estate continues to be a weak spot in the economy.

New home sales fell 8.1 per cent last month to a seasonally adjusted annual rate of 406,000, the Commerce Department said Thursday. The report also revised down the May sales rate to 442,000 from 504,000.

Buying of new homes fell 20 per cent in the Northeast, followed by less extreme declines in the Midwest, South and West. The modest sales caused the inventory of new homes on the market to increase to 5.8 months, the highest since October 2011.

The median sales price was $273,500, up 5.3 per cent over the past 12 months.

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Morgan Stanley paying $275M to settle SEC charges

WASHINGTON (AP) — Morgan Stanley has agreed to pay $275 million to settle U.S. civil charges that it misled investors about risky mortgage bonds it sold ahead of the 2008 financial crisis.

The Securities and Exchange Commission announced the settlement Thursday with the Wall Street bank. The SEC said Morgan Stanley failed to accurately disclose the delinquency status of home mortgages backing two securities deals that it financed and sold in 2007.

The mortgages underlying the securities had a total value of about $2.5 billion, according to the SEC.

The $275 million Morgan Stanley is paying includes a $96.4 million penalty and $160.6 million in restitution of profits from sales of the bonds, plus about $18 million in interest. It will be returned to investors in the deals who were harmed, the SEC said.

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By The Associated Press=

The Dow Jones industrial average edged down 2.83 points, or 0.02 per cent, to close at 17,083.80. The Standard & Poor’s 500 index rose 0.97 of a point, or 0.05 per cent, to 1,987.98. Nasdaq composite fell 1.59 points, or 0.04 per cent, to 4,472.11.

Benchmark U.S. crude for September delivery dropped $1.05 to $102.07 a barrel on the New York Mercantile Exchange. Brent crude for September delivery, a benchmark for international oils, fell 96 cents to $107.07 on the ICE Futures exchange in London. Wholesale gasoline fell 2 cents to $2.84 a gallon. Heating oil was flat at $2.87 a gallon. Natural gas gained 8.5 cents to $3.85 per 1,000 cubic feet.